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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






2. The imbalance between limited productive resources and unlimited human wants






3. The practice of selling essentially the same good to different groups of consumers at different prices






4. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






5. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






6. Ed > 1 - meaning consumers are price sensitive






7. Models where firms are competitive rivals seeking to gain at the expense of their rivals






8. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






9. Ed = 8 - infinite change in demand to price change






10. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






11. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






12. Ei > 1






13. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






14. The ability to set the price above the perfectly competitive level






15. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






16. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






17. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






18. Product demand - productivity - prices of other resources - and complementary resources






19. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






20. The price of a good measured in units of currency






21. Costs that change with the level of output. If output is zero - so are TVCs.






22. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






23. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






24. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






25. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






26. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






27. The change in quantity demanded resulting from a change in the price of one good relative to other goods






28. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






29. All firms maximize profit by producing where MR = MC






30. The total quantity - or total output of a good produced at each quantity of labor employed






31. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






32. The difference between total revenue and total explicit costs






33. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






34. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






35. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






36. The output where ATC is minimized and economic profit is zero






37. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






38. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






39. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






40. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






41. The rational decision maker chooses an action if MB = MC






42. Exists if a producer can produce more of a good than all other producers






43. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






44. The marginal utility from consumption of more and more of that item falls over time






45. The mechanism for combining production resources - with existing technology - into finished goods and services






46. The additional cost incurred from the consumption of the next unit of a good or a service






47. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






48. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






49. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






50. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.